GBP/USD Extends Decline As Safe Haven Trade Continues
GBP/USD fell again on Monday, extending Cable to a second straight day of losses and pushing the bids back down to the 200-day Exponential Moving Average (EMA) just above 1.2700. After a brief response, the US Dollar once again dominated the risk-off flows, with deflationary investor sentiment strengthening the Greenback across the board.
After a tense week that saw the US shift fully to a protectionist trade stance (but without the industrial infrastructure to support it), sweeping import tariffs came into effect, with the US imposing a flat 10% import tax on all goods from all countries, as well as a widely varying “reciprocal” tariff derived by dividing US imports by US exports. After imposing an additional 34% tariff on Chinese goods, China retaliated by reimposing its own 34% tariff on all goods shipped from the US. With no other way to resolve the issue, the Trump administration threatened to impose an additional 50% tariff on all Chinese goods, which will go into effect on April 8.
US data is back in the spotlight this week; US Consumer Price Index (CPI) inflation figures are due on Thursday, with US Producer Price Index (PPI) inflation and the University of Michigan (UoM) Consumer Sentiment Index survey results due on Friday. This will be the final burst of key US inflation and sentiment figures from the ‘pre-tariff’ phase of 2025, setting the tone for the rest of the calendar year.
According to the CME’s FedWatch Tool, investors are again betting that the Federal Reserve (Fed) will start cutting interest rates to stave off a recession. The interest rate market is pricing in nearly 200bps of rate cuts by the end of 2025, although ongoing Fed policy speeches are warning that trade uncertainty is making it harder, not easier, for the Fed to cut rates.
Source: FXStreet
